A DC trusts and estates lawyer can provide assistance with all types of estate planning techniques so you can develop a comprehensive plan for your future.

Mort graduated from Yale Law School after graduating cum laude from Bowdoin College where he was an elected member of Phi Beta Kappa.

Ms. Haber earned her Bachelor of Science in Psychology and her Juris Doctor from the University of Florida.

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DC Estate Planning For Non-Citizens

DC estate planning for non-citizens is always complicated, even if there are no restrictions for non-US citizens that wish to complete estate planning in the District of Columbia or in the US. It may be prudent for a non-US citizen to complete the estate planning process when he or she is residing in the United States or has assets in the United States.

Differences in Planning for Non-US Citizens

The client’s country of origin or country of citizenship as well as DC and US tax and inheritance laws must be taken into consideration when planning an estate. Every country has unique tax and inheritance laws. Some countries have regions or jurisdictions within the country that have varying tax or inheritance laws. The complexity in planning for a client that is not a US citizen is that the attorney has to understand applicable laws of the client’s country of citizenship as well as US tax inheritance laws.

Our firm commonly works with clients to identify an attorney that is licensed to practice in their home country so that a coordinated estate plan can be created to cover US concerns as well as concerns in the country of origin or country of citizenship.

Process of Estate Planning

The process of estate planning in DC is the same regardless of whether or not a client is a US citizen. The client will meet with an attorney and discuss their worldwide assets and any prior estate planning. Generally, in that first meeting, an attorney will review the applicable US law, the applicable DC law, and applicable DC and federal estate taxes. The complexity of planning for a non-US citizen often is in the details of the estate plan. Many times, an individual will want to name non-US citizen beneficiaries or trustees, which could have tax and practicality consequences in both the United States and the country of citizenship.

Usually, after the initial meeting, an attorney will complete a structure of an estate plan, and then will draft the documents and the client will review them. There may be necessary revisions before the client signs the documents. What is always particularly difficult with clients that are non-US citizens is whether or not the US document will be accepted in a foreign jurisdiction. For that reason, our firm often works with an attorney licensed to practice in the country where the individual is a citizen, to prepare a coordinated worldwide estate plan.

Impact of Not Having Citizenship

There are a couple of big impacts on DC estate planning for non-citizens. The first is the coordination of the individual’s worldwide assets. The first practical issue is whether a last will and testament that has been drafted according to the US law is compliant with the foreign jurisdiction. Often, we work with an attorney licensed in the foreign jurisdiction to ensure that a coordinated estate plan can be created.

Another issue with working with a non-US citizen is the federal or estate tax consequences of being a non-US citizen. In some situations, the US does not treat non-citizens the same way that it treats citizens for estate and income tax purposes. There are a limited number of estate tax treaties and if the United States does not have an estate or income tax treaty with the country of citizenship, the result could be double taxation of the worldwide assets for the non-US citizen.

In addition, there are some positions from the District of Columbia that a non-US citizen and non-legal resident cannot hold, such as personal representative. That makes the selection of fiduciaries, in certain circumstances, more complicated as well because a non-US citizen may have a family or their closest relative in another country, which may prove to be an issue with the administration of US assets.

How an Attorney Can Help

An attorney can assist with estate planning for non-US citizens or residents by reviewing the tax consequences with the client and coordinating with an attorney in the country of citizenship or residence to ensure that a worldwide overall estate plan is created. An attorney can also assist with the selection of fiduciaries that would be permitted under DC and US law, and providing an analysis of how assets would be treated for inheritance tax and inheritance or probate purposes in DC.

Consequences for Estate Taxes

The current federal estate tax exemption is $5,450,000, which is indexed for inflation from $5,000,000. In DC, the policy is not to protect estates at that level. Instead, there is only an estate tax exemption for estates that are a million dollars. There has been some movement in the District of Columbia to increase the estate tax filing threshold to $2,000,000, but that is not anticipated until, at least, 2017.

Generally, DC follows the federal rules for valuation and for inclusion in the estate tax return. To complete a DC estate tax return, a federal estate tax return or Form 706 is prepared pro-forma and filed along with the DC estate tax return, even if an estate falls below the $5,450,000 threshold. DC also allows for the federal concept of the marital deduction. The federal estate tax law, which is applicable in DC because it mimics the federal law, allows for unlimited assets to be distributed at the death of the first spouse to the surviving spouse free of estate tax.

The concept is not meant to be a reduction of estate tax. Rather, the idea is that the estate tax will be collected at the death of the second spouse. The marital deduction is currently not available when the surviving spouse is a non-US citizen. This can result in estate taxation at the death of the first spouse, which could deplete the couple’s or the family’s overall wealth. There is an estate planning technique called a Qualified Domestic Trust (QDOT), which does allow for any assets held in a trust to qualify for the marital deduction.

The QDOT has specific requirements and, essentially, allows for a surviving spouse to receive income from the trust, but any access of the principal could result in estate tax liability. The federal government or DC can collect taxes on those assets, but it does allow for some deferral for the second spouse.

The other issue for non-US citizens is that if the individual is a non-US resident or citizen, but holds assets in the US, they may be subject to federal or DC estate tax and the exemption rate for the federal estate taxes is a lower limit than the $5,400,000 and the DC estate tax rate.

Owning assets in the United States alone may result in the requirement to file an estate tax return. Although, for countries that do not have an estate tax treaty with the US, the effect could be that assets are double taxed both in the US and in the country of citizenship or residency. Then, the US takes the position that it taxes worldwide assets in many cases and so it is possible that assets that are located out of DC or the US are includable on an individual’s US federal estate tax return or DC estate tax return.

Naming a Non-US Citizen as Personal Representative

A non-US citizen or resident cannot be named as a personal representative in DC. If an individual that does not qualify is named, the successor nominated personal representative becomes the person with the ability to serve in DC. If no one is nominated to serve as the personal representative, the Superior Court of the District of Columbia may appoint a personal representative.

The complication is that DC’s current position is that all relatives to the fifth degree have priority to serve based on their relationship to the decedent. That may make it difficult to open an estate where an individual has not nominated someone in their last will and testament to serve as personal representative that can actually qualify as a personal representative. The process can be costly and can require a search for all related individuals or any related individuals, who may be entitled, to serve as personal representative.